Online Food Delivery: Amid Fierce Competition, Grubhub Remains No. 1 For Now
With increasing competition and growth in the online food delivery space, GrubHub Inc (NYSE: GRUB) is still the brand leader, according to Loop Capital.
Grubhub has a 40 percent market share, aided by its brand recognition, despite Uber’s entrance into the market with UberEATS, which sits at No. 3 with 23 percent recognition and growing. Amazon.com, Inc. (NASDAQ: AMZN) Prime now holds the No. 2 spot with 34 percent.
“We continue to see the majority of the market growth going to GrubHub, Amazon and UberEATS over the next several years,” said Loop Capital.
More consumers are demanding delivery with the proliferation of several new services, increasing the reach of restaurants that previously did not have delivery options.
“When asked how significant delivery is in their decision to order from a particular restaurant or service, 28 percent said it is a must, up from 23 percent in April,” said Loop Capital analysts.
Amazon Prime, UberEATS Posing Threats
With Amazon’s ability to invest heavily with little regard for short-term profitability could pose a threat to Grubhub in the future. Amazon is expected to gain market share and expand well beyond the 18 markets it is currently in. UberEATS is currently in 28 U.S. markets and 23 internationally.
Despite the growth in competition, GrubHub management indicated in November that it has not seen an impact to order growth or pricing due to Amazon or UberEATS.
Clearly, the online food delivery industry is growing as a whole, and a host of new entrants — including Yelp Inc (NYSE: YELP)'s Eat24, Groupon Inc (NASDAQ: GRPN)'s OrderUp and Square Inc (NYSE: SQ)'s Caviar service — have joined the ranks. It remains to be seen if Grubhub will hold the top spot with Amazon and Uber nipping at its heels.
Loop Capital maintains a Buy rating on Grubhub.
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